Restaurant operators’ optimism wanes

NRA’s Restaurant Performance Index slips in June

Restaurant operators appear to be less optimistic about their future prospects, which contributed to a decline in the National Restaurant Association’s Restaurant Performance Index for the third consecutive month.

The RPI fell to 99.5 in June, a decline of 0.3 percent from May and the lowest level since February, according to the NRA. It also marks the second consecutive month the RPI has stood below 100, which reflects contraction in the monthly index of key foodservice industry indicators.

High-end restaurant chains say business, travel spending up

The return of business travel and conventions is driving traffic at fine-dining chains, many of which have recently reported positive same-store sales after suffering from empty dining rooms during the recession.

While steakhouse chains including Morton’s, Ruth’s Chris and The Capital Grille have taken advantage of the increased spending among their core markets, the high-end seafood chain McCormick & Schmick’s says it has suffered from the Gulf oil spill, which has kept consumers away.

A look at industry same-store sales

(March 16, 2010) Nearly all public restaurant companies reported fourth-quarter same-store sales results this month, and winter storms and lingering economic pressures pushed most into negative territory. Some, mainly because of value messaging, moved in a positive direction.

For the fourth quarter, or the quarter ended closest to December for companies on a non-calendar fiscal year, quick-service chains on average posted a larger same-store sales decline than any other restaurant industry segment. Quick-service chains were hurt by rising unemployment as well as comparisons with a year earlier when sales trends for fast food were still stable. Casual-dining chains still struggled for customer traffic in the fourth quarter, but some same-store sales results did ease from a year ago. On average, pizza chains and coffee and snack brands were able to post positive same-store sales in this harsh environment, while the fast-casual segment, which is typically the fastest-growing segment, posted, on average, a same-store sales decline of 0.8 percent. That was mostly driven by a double-digit drop of 11.9 percent at Cosi.

The averages were based on all chain reports for the latest quarter, including international operations.

Jeffrey Warne, recently named CEO of Nashville-based O’Charley’s Inc. and The Tennessean, the Nashville newspaper, did a Q&A with him in today’s Sunday edition.

Here is just one question, as answered by Warne:

How has the company controlled margins?

If you go back to 2008, we made the tough decision to reduce support staff. We eliminated some positions and through attrition we did significantly reduce the staff by about 20 percent. We also set up in 2008 a labor model that would predict when guests are in the building.

Using eight years of historical data, we mapped when guests were in our restaurants in 15-minute increments. The labor model was very effective at controlling labor costs. When we matched our labor as best as we could to when (guests) were in the building, our guest satisfaction scores took off, as well.

It is an informative series of questions and answers with a “numbers guy” and you can read the entire interview here:

Nation’s Restaurant News has two articles in their “Breaking News” feature that points out the complexities of restaurants dealing with the economic crisis:

O’Charley’s posts positive guest counts By Elissa Elan

NASHVILLE, Tenn. (Feb. 4, 2010) While consumer pressures tied to the recession pushed fourth-quarter sales into negative territory at the three chains of O’Charley’s Inc., its namesake brand and Stoney River Legendary Steaks chain posted their first year-to-year traffic increases in more than three years.

The company also posted a narrowed net loss of $15.2 million, or 72 cents per share, for the quarter ended Dec. 27, versus a loss of $68.2 million, or $3.34 per share, in the same quarter a year ago. The improvement was mostly because of year-ago charges, when O’Charley’s booked more than $60 million in impairment for goodwill and restaurant closures.

Latest-quarter revenue declined 6.9 percent to $188.9 million, the result of consumers cutting back on spending, O’Charley’s officials said. The company, which operates or franchises 368 restaurants under the O’Charley’s, Stoney River Legendary Steaks and Ninety Nine Restaurants casual-dining brands, had expected sales of between $190 million and $195 million.

Notice that this is a good news/bad news sort of thing. Cover counts are up, but people are spending less. This means that sales are still soft.

Also:

U.S. restaurant count declines

By Molly Gise

CHICAGO (Feb. 4, 2010) The number of U.S. restaurants fell this past fall as the industry continued to suffer from serious declines in traffic and sales. The rate of closures, however, was less than what was reported last spring.

According to The NPD Group’s ReCount data released Wednesday, the total number of U.S. restaurants declined 0.3 percent, or by 1,652 restaurants, to 578,353 locations in the fall of 2009, compared with the fall of 2008. ReCount tracks commercial restaurant locations twice a year, in the spring and fall.

“NPD’s fall 2009 ReCount reflects a slowdown in chains expanding, and two years of a challenging economy already weeding out the poorest performing restaurants,” said Greg Starzynski, NPD’s director of product development for foodservice.

So, while there are positive signs, the restaurant sector continues to face challenges, which makes it even more incumbent for waiters to execute at a high level. If you’re seeing more people but less total sales, upselling is more important than ever. As always, upselling shouldn’t be done solely to extract the maximum amount of money from the guest, but should be done to enhance the dining experience. Never lose sight of this basic tenet.

SCOTTSDALE , Ariz. (Aug. 12, 2009) P.F. Chang’s China Bistro Inc. said Wednesday it has agreed to lend $10 million to Fox Restaurant Concepts to develop more units of Fox’s True Food Kitchen, a health-oriented eatery that opened late last year in Phoenix.

Terms of the deal were not disclosed, but P.F. Chang’s said the debt capital could be converted into a future majority equity position. Fox Restaurant Concepts president and chief executive Sam Fox partnered with wellness author Dr. Andrew Weil to open the restaurant in the Biltmore Fashion Park as a regionally sourced “global” eatery.

“We have admired the work of Sam Fox and his team for quite some time,” Bert Vivian, co-chief executive of P.F. Chang’s, said in a statement. “We are pleased to be able to provide capital for the growth of their newest creation.”

P.F. Chang’s said the transaction would not have a material impact on its financial condition or prospects for the foreseeable future. In 2005, P.F. Chang’s first ventured outside its China Bistro and Pei Wei Asian Diner concepts to open Taneko Japanese Tavern in Scottsdale. The concept failed to gain a profitable following and was closed after sale attempts were made in 2008.

I find this to be an interesting trend, especially in these days of rough economic waters. Restaurant chains becoming debt capitalists in order to diversify their holdings without actually creating new companies themselves? As the article indicates, it might not always be smooth sailing, but it it a creative use of capital. This sort of thing has gone on in other industries, and, for all I know, it might not be a new development in the restaurant world, but I’m more familiar with buyouts and mergers. Obviously, this could lead to ownership or a true merger down the road.

Whether or not this ends up offering a good return on investment, it’s just another way that P. F. Chang’s seems to be thinking outside the box. But I guess it’s just business as usual for the only company that has really been successful at growing a nationwide Chinese-themed restaurant chain – note I didn’t call it a Chinese restaurant chain. Other larger entities (Darden by way of General Mills) have tried it and failed.

I suspect that the companies that survive this economic downturn are the ones that aren’t scared to cautiously expand, either into their areas of strength or in creative ways such as this. Refusing to give into panic is key – finding ways to create what the military calls force multipliers will allow operations to aggressively combat weak economic times. This might include cost-cutting measures, but, as doctors found in the 18th century, bloodletting only gets you so far.

Hi. It’s good to see you again. I see that people are still interested in the blog. Sadly, I’m still sort of out of time, energy, and topics to keep the flow going. I hope that this remains a handy resource to waiters of both sexes as I’ve covered a lot of useful topics. The […]

From David Hayden’s most excellent site, “The Hospitality Network”. David is also the author of a valuable book, “Tips2: Tips For Improving Your Tips“. The book is worth its weight in gold for servers who want to give themselves a raise. David’s article is about a new IRS ruling regarding automatic gratuities (autograts). http://hospitalityformula.com/a-new- […]

In fairness, here’s (apologies to Paul Harvey) “the rest of the story”. At least the pastor says that she left a cash tip of $6. I’m inclined to believe her. Despite her self-proclaimed “lack of judgment”, I doubt that she would break a Commandment to compound her embarassment. The real lesson in this is that […]

First, this proves that waiters should be very circumspect about posting to social sites, especially when sharing things like receipts. But, above all, it shows the sort of thinking that supposedly religious people apply in the real world. Disgusting. Hope that this pastor is outed. Feel free to share. Repeatedly. http://www.huffingtonpost.com/2013/01/31/app […]

Hey guys, yep, I’m still alive. Just haven’t been all that inspired to post lately. I’ve discovered that once you get out of the habit, it’s hard to get back in. In any case, a friend of a friend has written a new novel set in the restaurant milieu. I haven’t read it yet, but […]